How To Use Collateral To Secure a Loan

Have you ever been in a situation where you have no money but need to raise it instantly; or your business really needs a quick cash influx to survive but your credit score to obtain the right loan is low? Then using collateral may be your best option. Fast Action Finance calls them Collateral Loans.

Collateral is a type of security in the form of a property or asset that is used against the loan. Depending on the type of collateral, type of loan, and the lender, your collateral may be temporarily held by the lender, or you may be able to keep it for the duration of the loan. For example, using jewelry as collateral will most likely need to be held onto by the lender. However, if you use your car as collateral in the form of a title loan, then the lender will simply place a lien on your vehicle and you can continue to use it as usual. That is to say that you keep driving it as normal.

Most banks and other financial institutions need collateral for secured loans and mortgages. The value of the collateral can be less, equal or greater than the value of the loan. As an applicant, you can give anything deemed valuable from real estate to inventory, jewelry, art and even stocks and bonds.

So how do you use collateral to effectively secure a loan?

Know the type of loan and the amount

If you know what kind of loan you want to get, then it will be easy for you to decide what collateral you will use to cover the loan. If you are the owner of a sole proprietorship then you will be required to apply for a commercial loan.

This means that the collateral you offer can be real estate, marketing securities and other assets that you think are valuable. If you are an individual looking to finance a personal project then you can use jewelry, land or even art as collateral. Remember that most banks will need collateral even if you have a good credit score. If you do not have the best credit score then greater importance is placed on the collateral in order to secure the loan.

Have a detailed account of your asset’s worth

Many people, business owners or individuals using collateral loans think that the asset they own has a higher value then it does. What you should be aware of is that the financial institution that you have borrowed from will value the asset based on fair market value. It does not matter the price that you bought the asset for. If the market value of that asset is low, that will be the value of that asset.

If you can’t determine the worth of your assets, you could consider getting an appraiser to give you a clue on the value. You can also look online to see how much assets similar to yours are generally selling for, or you can contact the financial institution directly to see how they value such asset.

Know what to leverage as collateral

If you own a paid-off vehicle and do not want to surrender it for the duration of the loan then a title loanis your best option! A lien will simply be placed on your car, which will then be immediately removed when the loan has been paid in full. You can continue to use your car as usual and will not need to surrender any valuable possessions in order to receive the loan.

Finding a Toronto collateral loan can be a huge task especially if you have a bad credit score. There are a number of companies however, that are willing to service your loan. Over here at Fast Action Finance, we do not focus on your past or your credit score. The only requirement needed to be approved for a loan is to have a car registered in Ontario with decent value.

Feel free to contact us and we will be happy to assist you with any of your questions or concerns.